After adding $5 billion to their original offer for Yahoo (Nasdaq:YHOO), Microsoft (Nasdaq:MSFT) decided to drop its bid for the company, not willing to increase the offer. The final bid valued Yahoo at $47.5 billion: $33 a share. The first offer was for $31 billion.
Yahoo and co-founder CEO Jerry Yang were delusional in their assertion the company was worth $40 a share; the amount they said they would only do the deal with. Even the $37 a share they probably would have accepted is far more than the company is or will be worth anytime soon.
The rejection of the Microsoft offer by not accepting a value that is more than the company is worth, will end up with a flurry of lawsuits Monday, which will have a strong chance of succeeding. The legal responsibility of the management and board of a publicly held company is to its shareholders first.
Laura Martin, a senior analyst at Soleil Securities, said, "The Yahoo guys want too much money for their company. We think $33 a share is fair in the context of the weakening economic environment and adverse advertising trends.
"I think you'll see a number of shareholder lawsuits on Monday. They've prioritized employees over shareholders in the hopes that someday they can create more than $8 billion of value, even if they have no track record of doing so."
That's the problem Yahoo has had for years, they haven't been able to turn the corner and increase value in the company. There's nothing in the works that will do it either.
The idea of working with Time Warner (NYSE:TWX) and Google (Nasdaq:GOOG) was only reactive to the bid by Microsoft to fend them off. If that's the only strategy Yahoo can think of going ahead, they are in real trouble indeed. Of course most of us know that already.
Shares in Yahoo will dive when the market opens Monday, infuriating even more shareholders.
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